Hasbro heads to bottom line beat, revenue falls short

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Hasbro (NASDAQ:HAS) shares traded in a volatile manner after a mixed second quarter earnings result offered on Tuesday.

The Pawtucket-based toy manufacturer posted non-GAAP EPS of $1.15 alongside $1.34B in revenue. Wall Street had anticipated $0.94 and $1.37B, respectively. Consumer products as well as tabletop gaming revenues rose sharply in the quarter, making up for marked declines in entertainment segment revenues.

"Wizards of the Coast turned in its biggest quarter ever, led by 15% growth in tabletop gaming and 11% growth in MAGIC: THE GATHERING across platforms,” CEO Chris Cocks said. “We also significantly enhanced our digital play and direct-to-fan capabilities with the acquisition of D&D Beyond which will serve as an important growth driver for Hasbro's industry leading fantasy gaming portfolio.”

Management noted that higher paper and freight costs were overcome by strong sales in tabletop games as well, aiding in an over 200 basis point expansion in operating margins from the prior year. The margin expansion adds confidence in the company’s ability to pass through price increases to consumers.

On the other hand, an 18% decline in entertainment segment revenues declined 18% was tied to the sale of the music business and the timing of television releases. Each subsegment in the in the entertainment business, including family brands, film and TV, and music, each declined by double digits.

Other key issues impacting the retail industry broadly, including inventory levels and the stronger dollar, were touched upon by management. For the former, an over 40% jump from the prior year was tied to new product offerings.

"In the first half of the year, we took significant steps to secure inventory to help ensure product availability for upcoming product launches, major entertainment releases and the holiday season," CFO Deborah Thomas explained. "Foreign exchange is impacting our top line revenue growth, but our teams are executing well to meet demand and drive profit.”

Elsewhere, the company repurchased 1.4M shares for $124M during the second quarter and worked to reduce its long term debt load by over $600M.

Moving forward, the company expects low-single digit revenue growth and mid-single digit growth in operating profit to achieve adjusted operating profit margin of 16% for the full year.

Shares wavered between positive and negative in a quiet premarket session.

Read more on the results.